Saturday, April 08, 2006

Tories Signal Change in Housing Funding

The new federal government will support B.C. developers indirectly rather than by directly funding new housing projects, says a top Tory party strategist.

Bob Ransford says the Stephen Harper government will assist developers through tax breaks, including a rollback of the capital gains tax and a reduction in the GST, rather than through "direct handouts."

Ransford is a Vancouver-based communications consultant with strong ties to the development industry. He advised the Tories in the campaign that led to their January victory, and headed the party's B.C. campaign in the 2004 federal election.

The Harper government will do "whatever it can" to assist the development industry, Ransford said in an interview following a recent speech to the Urban Development Institute luncheon in Vancouver.

"What you're going to see is a much more business-friendly government, one that understands that our industry, in many cities, is the economic engine of the current prosperity that we're experiencing," says Ransford.

Although general in nature, his comments raise questions about the future of housing programs launched by former Liberal governments and co-ordinated through the Canada Mortgage and Housing Corp., the federal agency responsible for housing. Ransford noted developers should not expect Ottawa to fund smaller municipal infrastructure projects like the Liberals did.

Harper is committed to B.C.'s Gateway project, which calls for Ottawa to contribute billions to major transportation projects such as the rapid transit project between the Vancouver airport and downtown, and the Sea-to-Sky Highway between West Vancouver and Whistler.

The Liberals, who introduced the National Infrastructure Program in the early 1990s, funded "everything from heritage parks to museums and everything you can think of," notes Ransford, but the Conservatives are more likely to provide more infrastructure money to the provinces and give them more say in which municipal project receive funding.

The Conservatives have already pledged to abolish the capital-gains tax for individuals re-investing proceeds from the sale of assets, including real estate, and trim the GST to six per cent from seven per cent.

The luncheon session, in which Ransford answered questions from a moderator and audience members, was billed as the "new reality" for developers under the Conservatives.

David Podmore, president of the UDI's Pacific region and a leading Vancouver-based developer, hopes only some of Ransford's predictions come true.

"A piece that's been overlooked in (the capital gains tax) is that it applies to existing properties," says Podmore. "A lot of properties have been held by families for years and years and they're not selling those properties for re-development because (sales) trigger capital gains assessments.

"I don't think we've really focused on what the benefits could be of capital gains rollover in releasing land that is occupied by buildings that are obsolete or in need of (public) replacement ... so it could be a real catalyst to help build more housing in places where it could be more affordable."

But, he adds, Ottawa should continue to fund housing projects directly. Developers must do a better job of showing the federal government the benefits of continuing affordable housing projects.

"All of those really successful programs had a major federal component," says Podmore, also president and CEO of Concert Properties, which develops all types of real estate in Vancouver, Kelowna, Calgary and Toronto.

He is also calling for the Tories to fund rental-housing projects in order to build more inventory.

"Some people roll their eyes (at that idea) because there's higher vacancy rates, particularly in Eastern Canada right now," says Podmore. "But I think they should be looking at initiatives to encourage builders to build rental housing. We need to create new, quality rental housing. That's where the capital gains rollover is important as well."

Ottawa also needs to understand there must be a "major investment," particularly in Vancouver-area transportation projects, he says. Federal funding of such ventures will enable developers to work co-operatively with municipalities to plan development and ease environmental impacts and traffic congestion.

"It's probably one of the most forward-looking things that they can do."

He is also calling for strategic road construction that will improve the flow of goods across the Lower Mainland.

"The Catch-22 is road infrastructure versus the old axiom: The more you build, the more people will come," he says. "There's a certain element of truth to that, but I think they do have to invest in road infrastructure to take away some of the bottlenecks - the key bottlenecks - and try to improve the flow."

Douglas McKegney, a Vancouver-based development business consultant who attended the luncheon, says the new reality "is one of considerable uncertainty," because of questions surrounding the fate of the minority government. Developers want to see whether the Conservatives can deliver on their election promises, he adds.